Life insurance business income can still be scrutinised; statutory computation does not bar verification of the assessee's figures.

Section 44 read with the First Schedule governs the computation of profits and gains from life insurance business, but it does not bar scrutiny of whether the statutory method has actually been followed. The Assessing Officer retains jurisdiction to examine the books and verify the assessee's computation, and is not bound to accept the declared figure at face value. An appellate direction fixing income at the assessee's declared amount would improperly remove that assessment function. The legal position is therefore that the Revenue may require computation strictly in accordance with the statutory scheme while still testing the correctness of the return.

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Issues: Whether the Assessing Officer is precluded from examining the profits and gains of life insurance business and is bound to accept the assessee's computation merely because Section 44 read with the First Schedule to the Income-tax Act applies.

Analysis: Section 44 read with the First Schedule governs the computation of profits and gains from life insurance business, but that regime does not eliminate the Assessing Officer's jurisdiction to scrutinise the books and verify whether the statutory method has in fact been followed. The direction by the appellate authority that the income be assessed at the figure declared by the assessee had the effect of denuding the Assessing Officer of his assessment function. The Assessing Officer was still required to examine compliance with the First Schedule and was not bound to accept the assessee's figures at face value.

Conclusion: The question was answered in favour of the Revenue. The Assessing Officer must compute the profits from life insurance business in accordance with Section 44 read with the First Schedule, while retaining the authority to examine the correctness of the assessee's computation.

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